Ireland Inc looks a trifle different from the top of an Alp. Suddenly it becomes a nation without a mention on CNN or Bloomberg and totally ignored in the French press. So a perfect bolthole beckoned for an Irish news and gossip junkie seeking to be weaned off his daily fix of misery in the Irish media.
I found just the job: a small skiing village in France was carefully picked to teach me — pretty painfully — that we Irish are not the centre of the universe. A daily diet of the Dow and the Nasdaq, of Bush and Sarkozy, was perfect medicine for my insular outlook. The therapy lasted just 48 hours. Last Tuesday, I picked up the Daily Telegraph in pursuit of broader horizons. Whatever remaining drops of nationalist blood that still run in my veins began to boil.
The Telegraph has no tradition of being a friend of Ireland. On Tuesday it lived up to its reputation. The European edition of its business section spelled out the threat of Armageddon to Ireland. And worse still, the author seemed to enjoy the prospect.
“Property slump raises fears for Irish banks” blared out the headline.
Not exactly news — but the actual content of the piece was scary. It forecast “temporary nationalisation of Irish banks, bailouts, a wave of defaults and even banks on life support machines”. The piece quoted UCD economist Morgan Kelly as a witness for its thesis. A fair catch, although he is the most pessimistic economist in the Irish financial firmament. Nevertheless, grist to the Telegraph’s mill.
Had I missed a sudden disaster at home in just 48 hours absence? I instantly broke my self-imposed ban on Irish news and headed for RTE’s website. First, I checked the prices of Irish bank stocks. Perversely, it was one of those rare days when AIB and Bank of Ireland had risen. I savoured a moment of smug pleasure at the lack of influence of the Telegraph.
Yet I did notice a rather uncomfortable item on RTE’s business news. And let us be grateful that the Telegraph missed it. The item was far more troubling than any unsupported claims of Irish banks heading for trouble. The biggest corporate cash disaster in Irish history had been sorted. Dublin’s High Court had approved a quaintly called “scheme of arrangement” for all creditors of Tiarnan O’Mahoney’s collapsed finance house, ISTC.
This was a story that would have warmed the cockles of the business editors at the Telegraph: €820m has been written off in an Irish banking tale guaranteed to raise hairs on the necks of even the most hardened global investors.
It started when Tiarnan O’Mahoney, an amiable banker at high-flying Anglo Irish Bank, failed to win the top job three years ago. Tiarnan had been a hot favourite. Understandably disappointed, he upped sticks, left Anglo and started an investment outfit, a banker’s bank. He persuaded the great and the good of Irish business to invest in his idea. Among them were his former boss Sean FitzPatrick, Denis O’Brien, Gary McGann and a host of other movers and shakers. O’Mahoney is reported to have invested €5m of his own money in the new business.
In ISTC’s first year its shares doubled in value. Overenthusiastic supporters even spoke of an IPO. Last year it made nearly €7m. Then, all of a sudden, confronted by the credit crunch, the company went belly-up.
In Tuesday’s “arrangement” ISTC’s big ticket creditors recovered just 12c in the euro, writing off €385m. Its smaller creditors — outvoted by the big battalions — were left penniless, losing €270.5m. Doubtless Tiarnan is himself nursing a substantial loss.
No one will lose much sleep for the likes of O’Brien and FitzPatrick dropping a few million supporting their old crony. But it is hard not to have some sympathy for the 125 smaller investors who were persuaded to part with more than €43m for an ISTC bond, marketed by Friends First. Those bonds are now worthless. Friends First have pocketed their fee and are insisting that their penniless clients were fully informed of the risk.
But worst of all, a habitually hostile outsider, like the Telegraph, could still happily highlight the most comical part of the whole pantomime: the man who presided over the write-off of €820m in ISTC still sits perched at the top of Ireland’s pensions pole.
Tiarnan O’Mahoney remains chairman of the Irish Pensions Board, the guardian of Irish pensioners’ savings, the giant industry which supposedly nurtures the small guy. The Telegraph might patronisingly be tempted to say that it all looks a bit Irish. We are playing into our enemy’s hands.
The twin challenges facing the Irish Pensions Board are the penal fees and pitiful performance of Ireland’s pension fund managers. The second key test is the protection of Ireland’s small savers. It is Tiarnan’s task to challenge these failed posers and to protect their vulnerable clients.
He patently lacks the authority to do so. How can the man whose company incurred the worst corporate cash loss in Irish history upbraid flawed fellow travellers on their lamentable investment performance?
He will be laughed to scorn; just as he will be if he starts to throw shapes as the custodian of small savers. There were doubtless plenty of pensioner victims among the penniless smaller ISTC investors. It was the small guys who lost everything in Tiarnan’s rescue “arrangement”. Astonishingly, after all that, a settlement is being made: Tiarnan is back in the saddle, the banks are being paid 12¢ in the euro.
Now, politics raises its murky head. Tiarnan, the guardian of the peoples’ savings, was a political appointee. Minister for Social Affairs Martin Cullen should shortly knock on Tiarnan’s door. Otherwise the Telegraph and others will use this outfit’s record losses, the wipe-out of smaller savers and Tiarnan’s untenable position at the Pensions Board to spread their anti-Irish message.
And if Tiarnan sits tight, this disastrous ISTC story could carry far more danger to Ireland Inc’s reputation overseas than the Daily Telegraph’s gleeful thesis that our banks are in jeopardy.